Japan PMI January 2019

Japan: Manufacturing sector stalls in January

January 24, 2019

The Nikkei flash manufacturing Purchasing Managers’ Index (PMI) fell sharply from December’s revised 52.6 (previously reported: 52.4) to 50.0 in January, the lowest print since October 2016. As a result, the index now sits on the 50-point threshold that separates expansion from contraction in the manufacturing sector.

January’s reading reflected that all-important output and new orders fell into contractionary territory, while employment growth decelerated. Stocks of purchases decreased at a faster rate, while suppliers’ delivery times continued to lengthen. New export orders worsened in January, reflecting a somber global economic outlook. Moreover, price pressures remained subdued, suggesting that the country is far from overcoming Japan’s traditional “deflationary mindset”.

“The underlying picture will raise concern given renewed reductions were seen in new orders and output. Further signs that the downturn in the global trade cycle could yet worsen were also signalled, with new export orders falling at the sharpest rate since July 2016. The widely-anticipated rebound in Q4 should not distract from the bigger picture. Domestic economic weakness compounded with slowing global growth coincided with the lowest level of business confidence for over six years.”

FocusEconomics Consensus Forecast panelists see industrial production rising 1.7% in 2019, which is unchanged from last month’s projection. For 2020 the panel expects industrial production to expand 0.8%.

The downward revision to the GDP figure for Q2 sparked concerns about the future growth trajectory of the country as the economy is grappling with negative spillovers stemming from the China-U.S. trade war and uncertainty regarding the planned sales tax hike in October.

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